Acquiring capital from conventional sources for example banks can be complicated for small businesses, particularly when a business does not have a prolonged earnings history or adequate resources to collateralize, says Jeffrey Tannenbaum, from Ernst and Young.
In other cases, the terms put down with a conventional lender might not be satisfying, or perhaps a business could need a bit more supervision than the usual bank offer. That is when small businesses should move to alternative capital sources.
Angel investors can provide guidance and business-related proficiency along with cash. “The disadvantage to that is frequently you’re giving up control of your business, as angel investors do play a dynamic part and they do frequently take an equity position,” states Tannenbaum. Similarly, VC firms invest in startup business and businesses looking to develop.
They provide more possible capital as compared to angel investors, and also have strapping associations. Similar to angel investment, getting VC means quitting the reins to some level.
The CVCA keeps a searchable online database of venture capital firms in Canada, as the NACO includes a similar list on its website. One other good approach to finding potential investors is just to discuss with or search on the internet for businesses that are investing in companies much like yours.
Federal and regional government authorities run programs providing business loans and grants to assist entrepreneurs as well. “By doing that, you do not to sacrifice any equity inside the business, however it is much more impossible to find or there might not be just as much financing available,” Tannenbaum says.
Small businesses can get capital from crowdfunding websites, for example Kickstarter and Indiegogo, which permit them to pitch their plans on the internet and request for cash in return for some type of incentive. In addition, there’s peer-to-peer lending: Companies apply for a loan with an online firm that vets and posts the applications for investors to look through.
For companies looking for a small amount, lending institutions and credit unions frequently have microloan programs and are ready to provide financing when large banks fear to offer financing. And you can also get financing from your friends and family members.
Tannenbaum says, no matter what a business decides to do, it’s important to be ready with strapping, acceptable financial forecasts and plan well ahead.